Canada has quite a few big names as well. EA and Ubisoft have big development studios here. I just saw an ad online for a lighting assistant for the new dead rising game. It's being made here I guess.

Japan by far at least they try different stuff. U.S. if you are casual or P.C. only.

Japan

Capcom, Square, Konami. :)

Capcom list:
Mega Man
Street Fighter
Onimusha
Devil May Cry
Resident Evil
Captain Commando
Strider
Breath of Fire
Darkstalkers
Final Fight
Marvel vs. Capcom
SNK vs. Capcom
Dino Crisis

I love Blizzard & Valve, but Capcom remains king :)

Japan by a mile

Capcom + Square-Enix + Nintendo + Sega > All American devs put together

I've always thought Japan was much better than anywhere else. I still do.

OI! Rockstar is a British company; their HQ, Rockstar North, is based in Edinburgh, Scotland.

I think that Britain may be a contender. We have Criterion, Team 17, Studio Liverpool, Rockstar, Sony Studios London (Singstar, The Getaway), and tonnes more I cant think of.

Canada is surprisingly heavily into game development. Bioware is in Edmonton and Ubisoft has Montreal Studios. EA also has studios in British Columbia and (I only learned this 2 days ago) Silicon Knights is in St. Catherines, Ontario, which is only an hour and a half from where I grew up. I'm not saying they have the MOST studios or even the best, but they're definitely overlooked when it comes to game development and recognition.

Also, I thought Rockstar was British... correct me if I'm wrong :S

I have favourite studios from all over the place but if I had to choose I'd probably go with the US for Valve, Bungie, Santa Monica studios and a few others. Can't say I like any studios from Japan - I don't dislike any either. I don't keep up with a lot of the development around there but I certainly enjoy JRPG's... I'm just unknowing of who is making which and what the studio's track record is... (I'm new to the JRPG scene but loving every bit of it :D!)

Edit: After thinking about it more and reading some more comments I really can't choose. Britain also has Lionhead studios and Criterion as someone mentioned as well as a few others. Konami, Capcom and Nintendo are from Japan. Although I'm not a huge fan of any of their games I will give credit where credit is due. They do make some amazing stuff and have world-wide fanfare. I'm gonna call it an X way tie, where X represents all countries/regions involved in game development!

1. USA
2. UK
3. Canada
4. Japan

A few more British studio not mention - Crytek UK (Free Radical lolz), Evolution Studio's (Merged with SCEE Liverpool now), Bizarre (Project Gotham Racing), alot of EIDOS too. Does the situation change if Europe is counted as one territory for anyone? I'm not sure how 'fair' that is but in terms of population and landmass I'd guess it's on-par roughly with America.

For me though America wins out, I love Japanese games and stuff but lately non of what the East is producing bothers me, other then a few Capcom games (Some of which are being developed in the west anyway lol). Konami can't seem to produce anything of worth other then MGS which I'm passable too, Square Enix are cool but do too many rehashes on DS / PSP, SEGA are crap now and Namco.... can't think of any games they have except Tekken :/.

But er yeah, Nintendo still have a great output, and Sony Japan have some top games too. Meh.

But we wuv Bioware too!  Can we sharez?